As they say, trading effectively is about assessing probabilities, not certainties. On that note, many of India’s bound tariff rates on agricultural products are among the highest in the world, ranging from 100 percent to 300 percent specially on alcohol import. While many Indian applied tariff rates are lower (averaging 32.7 percent on agricultural goods), they still present a significant barrier to trade in agricultural goods and processed foods.
On 1st February, 2020, Finance Minister Nirmala Sitharaman presented the Government of India’s (GOI) annual budget for Indian Fiscal Year (IFY) 2020/21. The GOI increased tariffs on several food and agricultural products, including dairy products, walnuts (shelled), edible vegetable oils, infant foods, and soy products. Products that are effected are cashew nuts, fruit juices, crude edible vegetable oils, refined edible vegetable oils, and soft drink concentrates. Food and agricultural products seldom are considered for permanent changes in the tariff structure and are reviewed periodically; however, the recent announcement was solely for increases in the BCD for a number of agricultural goods; the only reduction in tariff rate was for purebred breeding horses.
Commodities that have undergone some tariff changes and might affect the Dutch companies are mostly dairy products like cheese whose basic custom duty was 30% and now has been increased to 40%. Bulbs, tubers and other live plants were at 5% BCD and now is at 10%. No other significant change has come to notice that may affect the trade. But in general the impression the GOI wants to give is production/manufacturing should be more localized in India by using better technology and promoting more “Made in India”.
The U.S. on the other hand faces the challenge as the GOI took advantage of this tariff flexibility in the 2018 budget when it increased tariffs on 52 separate line items, including key U.S. exports in the agricultural, information and communications technology, and automobile parts sectors, with no warning or public consultation process. The increased tariffs also included agricultural products such as certain fruit juices (from 30 percent to 35 percent), certain edible vegetable oils (from 20 percent to 35 percent), and several other agricultural and non-agricultural items. A lot of these tariffs are in re-negotiation phase after the visit of Trump to India in February 2020. It will be no surprise if India rolls back import tariffs on certain exportable commodities from the U.S.